The EPA and Fuel Economy Standards: The Story Behind the Headlines

You may have recently heard that head of the EPA, Scott Pruitt, announced the agency intends to roll back Obama era fuel economy standards for vehicle fleets. There has been some confusion, including my own, about what this announcement actually means compared to how it is being portrayed in headlines. So let’s take a closer look at what was actually announced and what impacts it could have.

We should begin by understanding the regulatory landscape of the original fuel economy standards. There are two federal agencies with authority to set standards affecting average vehicle fleet fuel economy, the Environmental Protection Agency and the National Highway Traffic Safety Administration (NHTSA). In addition, the California Air Resource Board is granted a special waiver by the Clean AIr Act to set stricter standards than the EPA for the state of California. Other states can then choose whether to follow the California standards or EPA standards. In 2009 the Obama administration coordinated efforts between these three authorities to create a harmonized set of standards for average fleet fuel economy standards beginning with model year 2011. Increased standards were then planned for model years 2012-2016 and 2017-2025, subdivided in years 2017-2021 and 2022-2025.

With an introductory understanding of these fuel economy standards we can now better understand what the EPA actually announced. In its announcement, the EPA states it will revisit the planned fuel economy increases for model years 2022-2025. It is justifying this reopening of the matter with the assertion that the currently planned standards would be excessively costly to consumers and automakers while offering few benefits to the public. Under these claims, the EPA has initiated the process to set new standards for model years 2022-2025 in partnership with the NHTSA ‘that would eliminate the planned increases in fuel economy from 2021 levels'.

The original 2022-2025 standards were concluded to be technologically feasible and appropriate under the Clean Air Act by the Obama administration EPA in January of 2017. In order to set new standards that withstand legal challenge the agencies must explain why the previous analysis of original 2022-2025 standards was incorrect. This can be done by either using new information or reassessing information that was used in the original analysis.

If the EPA is successful in rolling back the 2022-2025 planned increases in fuel economy standards, the environmental impacts wouldn’t begin to seriously compound until several years after 2025. The EPA’s 2016 analysis of the existing 2022-2025 standards estimates a reduction of 1.2 billion barrels of gasoline and 540 million tons of greenhouse gases over the lifetime of vehicles produced between 2022-2025. Additionally, assuming that if no new increases in fuel economy standards are planned for beyond 2025 they would still remain at that 2025 levels. If the planned increases in economy standards for 2022-2025 are revoked by the EPA, then the effects could easily result in increased emissions and fuel consumption for vehicles beyond model year 2025.

Regardless of what the EPA and NHTSA find regarding the 2022-2025 fuel economy standards, CARB retains the authority set its own strict fuel economy standards for the state of California. Currently, 13 other states follow CARB’s standards representing between 30% and 40% of new car sales. California has already indicated that if the EPA and NHTSA were to eliminate the currently planned increases in fuel economy standards for 2022-2025, it would not follow suit and would be prepared to take it the matter to court. This would create two different sets of standards within the country.

While it remains unclear exactly how this dual regulatory environment would affect the auto industry and consumers, it is apparent that it will be more difficult and costly than complying with a single harmonized regulatory landscape. With that, we at least now have more information to disect the headlines and determine which fuel efficiency standard we prefer be enforced in the coming years.